The euro: is the end in sight? And how many more MF Globals will go down with it?
Paul Krugman seems to think so. And he's been good on calling events in the euro crisis.
And the European debt crisis has apparently claimed its first Wall Street victim, MF Global, whose CEO is the obnoxious former Democratic Gov. of New Jersey, Jon Corzine, a classic corporate Democrat: Sandro Pozzi, MF Global suspende pagosEl País 31.10.2011; Reuters, MF Global files for bankruptcy after deal unravels 10/31/2011. As Reuters reports, Corzine's "big bets on euro-zone debt sealed the company's fate." MF Global is small fry compared to Lehman Brothers, fortunately. But El País calls it the eighth biggest bankruptcy in US history.
In Mamma Mia 10./31/2011, Krugman explains that, given the market reaction since last week's latest rescue plan to Italian bonds - i.e., the rates are really high - he thinks the euro as we know it is near its end. The only thing he thinks that can prevent it is the European Central Bank stepping in as the lender of last resort to buy the bonds of eurozone countries like Italy that are being priced out of the bond market.
And the ECB has been dead-set against doing that. "The European rescue plan is falling apart even faster than I expected," says Krugman; "we're deep into self-fulfilling pessimism territory here."
Wolfgang Münchau in the Financial Times, What saves the euro will kill the union 10/30/2011, basically makes a case for the conservative, anti-EU argument. He argues that such measures as the following will need to be made to save the euro:
Eurozone members will need the European Central Bank as a lender of last resort. They will move from separate to joint liability of sovereign debt guarantees, possibly leading eventually to a eurozone bond. To solve underlying structural problems, they will need to harmonise their financial sectors, improve product and services markets, and co-ordinate labour market rules, an area now off-limits. They will have to start to co-ordinate tax policies, eventually, perhaps, introducing eurozone-level taxes.
For non-eurozone members of the EU - Münchau specifically mentions Britain, Denmark and Sweden - that will give anti-Europe politicians new arguments for being part of the EU. "The needs of market integration are different for a monetary union in trouble than for a wider club of countries primarily interested in free trade," Münchau writes.
But the European Union was never primarily about free trade. Trade agreements, beginning with the European Coal and Steel Community in the 1950s, were always seen by the leaders who negotiated them as steps toward political union. The purpose of "Europe" (the EU) was to prevent war and promote democracy through political union. If Britain or any other country that joined the EU saw it as a "club of countries primarily interested in free trade," they should never have joined in the first place.
In any case, if the EU project is going to go forward from this point, it seems to me that it will have to be in the form of a European Union without Britain. In the two decades since the European Community became the European Union (with the Maastricht Treaty of 1993), Britain has shown repeatedly that in foreign policy matters it is subservient to the United States, even on such a disastrous mission as the Iraq War. The US policy has been to keep the EU as a looser coalition of states as opposed to the kind of political and economic union it needs to make a common currency work and to have an effective common foreign policy. It seems to me that it is unlikely to work with Britain as a member.
Of course, it would be desirable in the abstract if the EU and the United States could work together for constructive goals. But in many areas such as democratic development, combating climate change, preventing war, strengthening international law and protecting human rights, the US has a far more limited commitment than the current EU. And the US has been downright hostile to those aims at times in the last two decades.
The current situation is an astonishing failure of leadership by Germany's Angela Merkel and France Nicolas Sarkozy, in particular, but by European leadership more generally. Someone like Prime Minister José Luis Rodríguez Zapatero in Spain would have done much more to preserve the EU and serve his own people if he had strenuously resisted the austerity measures demanded by the EU and the IMF from the start. So would Georgios Papandreou (Γεώργιος Παπανδρέου) in Greece; but in his case it seems almost a joke to suggest it, he's so blatantly siding with the financial bandits against his own people.